seminar in business plan development instructor: dr. william j. tsai, ph.d. the entrepreneurial...
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Seminar in Business Plan Development
Instructor: Dr. William J. Tsai, Ph.D.
The Entrepreneurial Process
Definition of an Entrepreneur
An Entrepreneur is someone who relentlessly pursues and opportunity without regard to resources currently under his/her control.
Perspectives on the Nature of Entrepreneurship
Creation of Wealth: Assuming of the risks associated with the facilitation of production in exchange for profit.
Creation of Enterprise: Founding a new business venture where none existed before.
Creation of Innovation: Combining unique resources that make existing methods or products obsolete.
Creation of Change: Adapting one’s personal repertoire, approaches, and skills to meet different opportunity sets.
Creation of Employment: Employing, managing and developing the factors of production, including the labor force.
Creation of Value: Creating value for customers by exploiting untapped opportunities.
Creation of Growth: Having a strong and positive orientation towards growth sales, income, assets, and employment.
The Entrepreneurial Process
Identify an Opportunity Develop and Refine the Concept Assess and Acquire the Necessary
Resources Implementation Manage and Harvest the Venture
Entrepreneurship
〝 The reasonable man (woman) adapts himself/herself to the world; the unreasonable one persists in trying to adapt the world to himself (herself). Therefore all progress depends on unreasonable men (and women)〞
George Bernard Shaw Men and Supermen〝 The role of the entrepreneur is to stand up to all, to
stand up to ridicule〞 - Tom Peters Thriving on Chaos
Inputs to the Entrepreneurial Process
Environmental Opportunities Entrepreneurial individual (s) An organizational context Unique business concepts Resources
Outputs of the Entrepreneurial Process
A going venture Value creation New products, services and
processes Profit and/or personal benefits Employment, asset and revenue
growth Failure/Loss
Lifestyle Ventures
Business built around lifestyle of founders Generating income to support desired lifestyle Controlled growth to maintain desired lifestyle Harvest concerns focus on retirement issues Usually self-funded; or family and friends Not conducive to angel or VC financing
Entrepreneurial Ventures
Business designed to yield capital gains Short-term income is of a lesser concern Focus is on value creation Harvest concerns focus on ROI Self-funding; followed by equity-funding Attractive to angel or VC financing
Seminar in Business Plan Development
Instructor: Dr. William J. Tsai
Opportunities and Concepts
Opportunity
Favorable circumstances pointing to a need Ability to improve something at a profit Better, faster, cheaper / Brave new world Existence of〝 pain〞 that can be removed Fixing an unsatisfactory situation Timing is critical
Types of Opportunities
PerennialCheaper, quicker, higher, quality, more reliable, incrementally better
Occasional Supply withdrawn, demand surge, new market segment, market holes
Multiple Cause More elderly with more income and more time on their hands
Multiple EffectIncreased longevity creates need for…, domestic terrorism creates need for…,
Finding Opportunity
Deliberate or active search, or
A〝 discovery〞 process as one pursues everyday life or a business idea
Examples of sources of Opportunity
Rule change
Demographic change
Underserved markets
Poorly served markets
Social trends
New customers to a market
Increasing usage rates
Shortages New technologies
to address unmet needs or change ways needs are met
Why would something not be a good opportunity?
No market need Customers not dissatisfied Customer loyalty very strong Customer〝 switching costs〞 Customers hard to reach Intense competition Easy for people to enter after you Customers too demanding relative to
what they’ll pay Window not open
Business Concept or Idea Specific value-creating method for
capitalizing on the opportunity New product, new service or new
process The〝 unique combination〞 that
defines how much value a customer is getting---can include price, distribution, packaging, etc.
Concept statement should be:
Concise and to the point
CNN’s concept might be stated a〝 instant information, anytime, from anywhere〞
Where do business concepts/ ideas come from?
Geographic transfer Prior employment Teaming with
inventors Hobbies Social encounters Everyday
observation
Aha experience Obtaining rights Daydreams Customer requests Invitation Deliberate search Necessity (mother of invention)
What is a good concept?
Many criteria exist (e.g., profit potential, leads to stream of products, barriers to entry, comprehensive, internally consistent)
But let’s focus on three core criteria
• Overt benefit
• New and different
• Reason to believe
Opportunity versus Concept/Idea Opportunity Labor shortage in fast food
industry (unskilled services in general)
High employee turnover in fast food restaurants
Lousy/inconsistent service Business Concept:
Hire and train high school students; act as outsourced labor supply to local Burger King franchisees
Opportunity versus Concept/Idea Opportunity
Business Concept:
On-line business that does customized greeting cards for all of your customers
Salespeople need to build relationships that are one to one: need ways to do so at a reasonable cost
The opportunity Matrix
Highly Competitive
Most small Small
Business Enterprises
HIGHPOTENTIAL VENTURES
The BlackHoles
Known Concept
Novel Concept
BIG
SMALL
REVENUE POTENTIAL
Qualities of an Opportunity
Durable Timely Creative or adds value Offers sustainable competitive
advantage Economics are rewarding and
forgiving
Criteria for Evaluating Venture Opportunities
Industry and market Economics Harvest issues Competitive advantage issues Management team Fatal Flaw issues Strategic Differentiation
Seminar in Business Plan Development
Business Model and Revenue Streams
The Core Components of a Business Model
How do we create value? Who do we create value for? What is our source of competence /
advantage How do we differentiate ourselves? How we make money? What are our time, scope and size
ambitions?
How do we create value?(Factors related to the offering)
Primarily products/primarily services/heavy mix Standardized/some customization/high
customization Broad line/medium breadth/narrow line Access to product/product itself/product bundled
with other firm’s products / services Internal manufacturing or service
delivery/outsourcing / licensing reselling / value added reselling
Direct distribution / indirect distribution (single or multiple channel)
Who do we create value for?(market factors)
Type of organization Local/regional/national/
international Where in value chain; upstream
supplier/downstream supplier/ wholesale/retail/ serve
Broad or general market niche
What is our source of competence advantage? (Internal capability factors)
Production / operating systems Selling / marketing Information management / mining / info.
Packaging Technology / R&D / creative or innovative
capability/ intellectual Financial transactions Supply chain management Networking / resource leveraging
How do we differentiate ourselves? (Competitive strategy factors)
Image of operational excellence / consistency / dependability
Product or service quality / selection / features / availability
Innovation leadership Low cost / efficiency Intimate customer relationship/
experience
How we make money (economic factors)
Pricing & revenue sources: fixed / mixed / flexible
Operating leverage: high / medium / low
Volumes: high / medium / low Margins: high / medium / low
What are our time, scope and size ambitions? (Personal / investor factors)
Subsistence model Income model Growth model Speculative model